Effect of antitrust penalties on share prices of Indian firms in cartel cases, 2011-21
We examine the stock market effects of anti-cartel enforcement on publicly traded companies. We include orders involving firms which were either found to have contravened section 3(3)of the Competition Act on anti-competitive horizontal agreements, as well as those which were ultimately found not to have violated the section. We employ standard event study analysis anda market model to examine whether the share prices of such firms showed significant negative/positive abnormal returns during pre-specified event and post-event windows, where the event is the ultimate finding by the Competition Commission of India (CCI). Contrary to the expectation, firms’ cumulative average abnormal returns (CAAR) were positive and significant during the 7-day and 11-day windows around the CCI orders that imposed penalties on them. A close examination of the pre and post event returns show that this result is driven by the sudden rise in CAAR in the pre-event time period, especially for the firms involved in sugar cartels. Firms which did not have any fines imposed by CCI showed negative CAAR, though the result is not significant. Our regression analysis shows a strong negative association between individual firms’ cumulative abnormal return for the 7-day event window and fines imposed by CCI, though this result is not significant if we consider post event window.
(Jointly with Aditya Bhattacharjea)